New Clause 2
Saving Gateway Accounts Bill
9:45 am
Stephen Ladyman (South Thanet, Labour)
I have already made my key points, and I remind my hon. Friend the Economic Secretary of them, so that he can address them. An important point was made to us in evidence: if we are to encourage people to get the saving habit, which is what these accounts are for, it is necessary to pay some interest on them, so that people understand that, once the Government have paid the bonus on maturity, there is still a good reason for keeping money in a savings account and adding to it from time to time, because interest will be added.
I confess that I did not find the people from the banking industry who gave evidence particularly sympathetic characters. Their cries of poverty stretched credulity a little. By their own figures, this market will be worth about £250 million a year. Even at today’s rates of interest, a back-of-the-envelope calculation based on the typical annual percentage rate offered on personal loans gives them a profit of £20 million on the money that they will get free from these savers and the Government.
The £20 million of profit has to go to administering these accounts, but that is not an insignificant amount of money for the banks to use for that, given that the Bill is about building their future customer base and encouraging people into the saving habit, which will stay with them in the long term. Having done the paperwork involved in getting people to open these accounts, the banks will not have to do it again when they transfer the matured funds either into ISAs or some other sort of savings account. That is another area of savings for them.
Even if the banks paid interest set at the current low rate, I estimate that they would still make about £14 million out of that £20 million, and they could use it to administer these accounts. I appeal to my hon. Friend not to take the banks’ cry of poverty and hardship too seriously when he is discussing whether interest should be paid on these accounts.